“Optimal” income taxation is always discussed against the background of classic economic theories:
In a very recent work, Piketty and Saez (2014) identify additional reasons why trends in top-income shares are correlated with the tax rates:
The current debate still lacks information about the top of the income distribution.
Our paper’s purpose is to identify anomalies in the tax patterns of ultra-wealthy Finnish people.
Taloussanomat
70,402 observations (N = ~15,000 ; T = 5)
Scraped all five years: 2009 to 2013
Created time series dataset
Created panel dataset using names as unique id’s (N = 4867)
Variables
Name
Total Income
Total Taxes Paid
Average Tax Rate
Rank
What is the responsiveness of reported taxable income to changes in average tax rates?
Our research is motivated by the framework laid down by Gruber and Saez (2002), Saez (2004), and Giertz (2007).
Gruber and Saez (2002) and Giertz (2007) uses panel data to observe income elasticities. Saez (2004) uses aggregated time series.
All of these papers look to observe long-term behavoiral elasticities, but given our dataset, we are only looking for short-term elasticies.
(inspired by Riihelä, Sullström, and Tuomala (2010))
Model from Giertz (2007)
Limitations:
Further research needed!
Giertz, Seth H. 2007. “The Elasticity of Taxable Income over the 1980s and 1990s.” National Tax Journal. JSTOR, 743–68.
Gruber, Jon, and Emmanuel Saez. 2002. “The Elasticity of Taxable Income: evidence and Implications.” Journal of Public Economics 84 (1). Elsevier: 1–32.
Piketty, Thomas, and Emmanuel Saez. 2014. “Inequality in the Long Run.” Science 344 (6186). sciencemag.org: 838–43.
Riihelä, Marja, Risto Sullström, and Matti Tuomala. 2010. “Trends in Top Income Shares in Finland 1966-2007.”
Saez, Emmanuel. 2004. “Reported Incomes and Marginal Tax Rates, 1960-2000: evidence and Policy Implications.” In Tax Policy and the Economy, Volume 18, 117–74. MIT Press.
Taloussanomat. “Tax Information Highest Incomes 2009-2013.” http://www.taloussanomat.fi/verotiedot/.